Debt

Debt Settlement firms promise to reduce consumer debt and help consumers maintain their credit. However, many firms simply take consumers' funds and do nothing to help them wiht their debt. MCRC worked with partners to regulate the industry in Maryland and educate consumers about how to decrease their debt.

The typical U.S. household has more than $7,000 in outstanding balances, up 45 percent from five years ago. A 2010 national study by Demos of low- and middle-income households found the average household had $9,827 in credit card debt. Consumer debt has grown for a number of reasons. Some individuals bought more goods and services than they could afford. However, for many individuals, credit cards were used to make up the difference between stagnant wages and rising costs of living. Between 2000 and 2006, most households experienced stagnant wages while the cost of living rose by 27 percent. To cover this gap, households accumulated nearly $900 billion in credit card debt. Results from the Demos survey found that at least 37 percent of low- and moderate-income households relied on credit cards to cover their rent, mortgage, groceries, utilities, or insurance when they didn’t have enough money in their checking or savings account to pay for these expenditures. These same households often increased their indebtedness to pay for a major home or car repair or to provide a safety net during a period of unemployment. Additionally, 52 percent of households stated that medical expenses contributed to their credit card debt.

In Maryland, MCRC has worked to increase access to sustainable credit and regulate industries that promise debt relief but instead, mire families in vicious cycles of debt. MCRC has worked to stop high cost payday lending in Maryland, regulate debt settlement firms, educate consumers on debt buyers and debt collection practices while pushing for policies that limit practices like "zombie" debt, provide information for students on for-profit school loans, and curtail the practice of debtors prisons in Maryland. This section includes information on debt settlement, debtors prisons, and rent-to-own stores.